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Fresno Lost $613,737 in Nationwide Phishing Scam in 2020

The California city was victim to a larger scheme that targeted several municipalities across the nation, but some wonder why city officials waited two years to provide information on the scam.

(TNS) — The California city of Fresno's loss to an online phishing scam totaled more than $600,000, was part of a larger scheme targeting multiple municipalities nationwide and the FBI has identified an American suspect, Mayor Jerry Dyer announced in a news conference at City Hall on Thursday.

Some details Dyer reported differed from information he shared the day prior. Dyer said he spoke to a special agent Wednesday evening and learned new information, but there were some details he wasn't sharing so as not to further compromise the federal investigation.

"This was part of a much larger scheme that was occurring," Dyer said.

Dyer spent a large portion of the news conference explaining why his administration didn't reveal the loss earlier, saying it was out of respect for the FBI investigation. He also explained how the Fresno City Attorney's Office handled a December public records request from The Bee and why records were not released.

"There's nothing more that I cherish as a public official, whether that was my time as police chief or now as the mayor, than earning the trust of this community," he said. "Once that trust is violated, I lose credibility as the leader of this organization. So I want to reiterate at no time was there ever an attempt to hide information from the public or to deceive any media outlet on a public records request."

The Bee broke the news of the phishing scam Wednesday after Dyer and Fresno City Councilmember Miguel Arias confirmed it.

Timeline of Events

In the news conference Thursday, Dyer said two payments totaling $613,737 were made in January and March of 2020 through wire transfers. The city received two fake invoices that looked identical to invoices from a city contractor working on the construction of the southeast Fresno police station.

The fraud was discovered in April when the contractor threatened to walk off the job due to not receiving payment, Dyer said. The fraud then was reported to the Fresno Police Department, and eventually the investigation was handed over to the FBI in November 2020. At that time, the FBI requested then-Mayor Lee Brand not disclose the loss to the public to protect the investigation, Dyer said.

Dyer, then the incoming mayor, was briefed on the situation. During his first Fresno City Council meeting in January 2021, he briefed the city council in closed session. He told the council the information was not to be made public.

On Tuesday, The Bee asked for an interview with Dyer regarding the loss. That's when Dyer also learned about The Bee's December public records request, he said.

"Naturally, I became very concerned that information had been leaked to the media regarding what we all knew to be an active, ongoing criminal investigation being conducted by the FBI," Dyer said. "I was also concerned with the fact that this information going public could very likely — having experience in law enforcement — could impact the chances of us, or the federal agencies, being able to arrest the suspects responsible for this crime and our ability to recover the dollars that were taken not only from us, but from other agencies, as well."

The special agent shared with Dyer that the case is complex and quite large, which is why the investigation has taken so long. Dyer estimated it will come to a close in around 45-60 days.

Since the fraud was discovered, Dyer said personnel action had been taken, however he did not say what and to whom. Both the city controller and public works director continue to work for the city.

City Leaks

Dyer said he was concerned to learn The Bee knew about the investigation and obtained city emails discussing the fraud. He did not speculate on why the information was leaked.

The FBI agent Dyer spoke to Wednesday evening was surprised and disappointed that a federal investigation was discussed publicly and in headlines, Dyer said. The agent was sure the suspects knew about the investigation, he said.

"As a public official for the city of Fresno, I felt the need to apologize to him for this leak because that information was shared with us in confidence," Dyer said.

"We're the only city, of all those that were victimized, to share this information publicly," he said, "which, as the mayor of this city, is quite embarrassing."

Dyer said he hopes the leak does not compromise the trust of the FBI in Fresno city officials, and he said he worried other local, state and federal partners may not continue to share important information with city officials.

"I know in the future that as the mayor of this city, I am going to be much more cautious in terms of the information that I share that I know to be confidential in certain settings," he said.

City Councilmember Garry Bredefeld blamed Arias for the leak, calling him disgraceful.

" Miguel Arias constantly and illegally leaks confidential and closed session information to certain media outlets," Bredefeld said. "Now this time he has potentially compromised a federal investigation and the possibility of the city not recovering all the stolen money. His ongoing unethical behavior is disgraceful and destructive to our city."

Arias maintained that the information he and the mayor disclosed did not compromise the investigation.

"I am glad to see the mayor disclose new and additional details with the public regarding the city's wire fraud victimization," Arias said. "His additional disclosures reaffirm that publication of this fraud incident does not compromise the integrity of the investigation two and a half years after it occurred.

"I want to reassure the public that we will continue to be as transparent as possible as this is their money, not ours," he said.

Public Records Request

Dyer said in the news conference Thursday he only learned about The Bee's public records request on Tuesday. The records request was sent in December to City Attorney Doug Sloan and Communications Director Sontaya Rose.

The city attorney's staffer who handled the request knew nothing about the fraud, Dyer said, and sent the request to the information services department. That department searched the city's email for "wire fraud," and the search came up empty.

The Bee earlier this week obtained email communication between Arias and three other city employees discussing the fraud. However, the emails did not contain the words "wire fraud."

Dyer defended the city attorney's office, saying they deal with thousands of request every month.

"There was an insinuation that perhaps the city of Fresno was being deceptive and did not provide records that were subject to this area, and I want you to know that is not true. It is not accurate," Dyer said.

David Loy, legal director for the First Amendment Coalition, said the city's response was troubling and strikes at the heart of public records compliance.

"It's very troubling that the city completely denied the existence of responsive records, when in fact there were records responsive to the content of your request, and that strikes at the very heart of public records compliance," Loy said. "If the agency denies that records even exist when they do, the requester has absolutely no way to challenge or press the agency on whether it is improperly withholding records. The proper course is to do a proper and adequate search, and if there are responsive records, acknowledge that fact."

Loy said the city is obligated to assert any exemptions so the requester may challenge them or engage in a dialogue so the requester can understand why the documents are exempt. In this case, there was no opportunity to do that.

"By definition, the person requesting records doesn't know what the records say or contain," Loy said. "So that's why the (California Public Records) Act imposes a duty on the city to make a truly good faith reasonable search, and in fact to cooperate with the requester in clarifying the search request."

There is a fundamental "information asymmetry" between requesters and the agencies that hold the records, he said.

"By definition, you don't know what you don't know," he said.

A requester doesn't know how records are filed, maintained, or who holds them. That puts the obligation on the city to be proactive and work cooperatively with the requester to identify issues or ambiguities and develop a search that's truly responsive, he said.

The city very well could have had legitimate exemptions from disclosing the emails, Loy said.

"We don't know because they didn't follow that process. But there is no exemption just because the FBI asked them to keep it confidential," he said. "The Public Records Act does not contain an exemption simply because one agency asks another agency to keep it quiet. Any exemption from disclosure must be rooted in the language of the law. The Public Records Act itself is the law of the land and must be followed."

(c)2022 The Fresno Bee (Fresno, Calif.) Distributed by Tribune Content Agency, LLC.
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